The housing industry received a boon on Friday when the president signed into law a bill reinstating the higher conforming loan limit on conventional mortgages backed by the Federal Housing Administration (FHA) to $729,750 for another two years.
The proposal was passed by Congress on Thursday as part of a broad spending bill, and marks a victory for housing and banking groups who have lobbied to have the FHA’s higher limits reinstated after they fell to $625,500 on Oct. 1.
In addition to the loan ceiling being raised, the multiplier that determines a county’s loan limit was also increased to 125% of an area’s median home price. While the higher loan limits will have the largest impact on high-priced coastal markets, such as Washington, D.C., New York, and parts of California, the increase in an area’s local multiplier, which fell in October to 115% of the median home price, will have a larger impact on more moderately priced markets.
In total, 620 counties across the country were affected by the FHA’s decrease in limits, according to the National Association of Home Builders.
Loan limit increases for Fannie Mae and Freddie Mac, which also saw limit decreases in October, were not part of the package, however. NAHB estimates that 204 counties have been affected by those agencies’ limit drops.
The floor for loans guaranteed by Fannie and Freddie is currently $417,000, while the lower limit for an FHA guarantee is $271,050.
While the news "is certainly not all the industry would hope for," says Robert Dietz, an economist at NAHB, "it’s still an important win when you consider the number of people being affected."
Claire Easley is a senior editor at Builder.
Learn more about markets featured in this article: Greenville, SC.